Here’s How I Find Emerging Industry Groups
As I’ve mentioned in the past, one way that I like to
find potential candidates for purchase (or short sale) is to pick an industry
group and scan through every stock in the group. How I pick the industry group(s)
I look at varies. Sometimes I’ll look through a group because it is in the news.
Other times, a colleague of mine might tip me off, or perhaps I’ll notice it in
the sectors section of the TradingMarkets.com
Indicators
page. There is no shortage of places to find industry groups that are coming
into form. One of the most effective ways I’ve found to spot an emerging
industry group is if I notice several stocks in the group are setting up or
breaking out. I normally will notice these kind of things as I’m flipping
through my charts over the weekend.
This past weekend, one group that began showing up more often than in the past
among my long scans was the Staffing & Outsourcing group. After noticing this, I
did some research using Investors Business Daily, and noticed that
although the group is still not one of the very top rated, it has climbed
farther in the past three months that any other industry group.
I then went through the charts of every stock in the group. A few had already
broken out and several more looked to be setting up. (All charts are weekly.)
(
GVHR |
Quote |
Chart |
News |
PowerRating) is far and away the leader of the group.
(
SRT |
Quote |
Chart |
News |
PowerRating) broke out just a few
days ago and is looking good so far.
 
A couple of others that seem to
be setting up are
(
LRW |
Quote |
Chart |
News |
PowerRating) and
(
MPS |
Quote |
Chart |
News |
PowerRating).
When I see several stocks in an
industry group emerging as this one is, I always take note of it. A strong group
will lift the prices of many of the stocks in that group, so pay attention when
flipping through your charts. If you notice several stocks in the same group
beginning to appear, it may be telling you something.
As far as the market goes, not much has changed since
last Wednesday. We’re still in an intermediate term uptrend with lots of
choppy action recently. This choppy action has helped to lengthen the
consolidation period we’ve been in for the last month and a half or so. It’s
becoming very important to make sure you are aware of the market’s action. The
longer the trading range lasts, the more violent the break of the range may be.
I’d continue to favor the long side since that is where the best action still
seems to be. Agility is important, though, as a breakdown and selloff in the
indices would undoubtedly create a lot of damage to many leading stocks as well.
Good Trading,